Expanding the tax net

The government has taken the right step to expand the tax net by issuing notices to eligible people and business owners. In this regard regional tax offices are issuing notices to owners of private schools and tuition centres to pay their due taxes in big cities. The clutches of tax officials should also reach small towns where such businesses are doing exceptionally well. The Federal Board of Revenue (FBR), under its maverick chairman Shabbar Zaidi, has issued notices to unregistered private schools and tuition centres in Islamabad, Faisalabad, Rawalpindi, Karachi and Lahore. It is recommended that the phased drive should reach all cities to issue notices to unregistered taxpayers, both the owners of businesses and their employees. FBR has already started a drive to register doctors in Karachi and the drive should soon reach other cities as well. Similarly, unregistered hospitals and their employees must be brought into the tax net.

When the previous chief justice Saqib Nisar took up the issue of exorbitant school fees and ordered a few elite schools to present their audit reports, much to the shock of everyone, it emerged that the owners were drawing salaries as hefty as Rs8 million, whereas school chains’ incomes ran in the billions. Seeing public tendency to go for private schools and hospitals, which speaks volume of the failure of public education and health sectors, plenty of schools and hospitals have opened up in almost all cities. In Karachi alone, the BTB has issued notices to 6,324 private schools, including A-level tuition centres, pre-nursery training schools and other academies. Not only schools, BTB has issued noticed to the parents of students who pay more than Rs200,000 per annum as tuition fee but did not exist on the tax roll. Similarly, in Rawalpindi, notices have been issued to unregistered schools and their employees.

The services sector, which often runs along the informal economy, has been avoiding taxes. Several professions and occupations, which make money under the per-hour regime, need to be registered. In other countries, those providing informal services from their homes are also made to pay taxes. In our part of the world, the formal services sector, which runs advertisements bragging about its huge economic successes, often wards off government’s efforts towards documentation. Not anymore. Well done, FBR. *